This, my final post on the forthcoming budget, is designed to provide a guide to how to read what Reeves announces (or doesn’t announce) in a way that goes rather deeper than the normal media commentary. My perspective, along with a large part of the UK population, is how much does the budget get us on a path designed to end public service austerity. (See here for what I mean by that.) As I argued here, a budget that focuses on filling black holes rather than restoring public services will be a political failure. So I will start with current public spending, go on to talk about what taxes might be raised to match that spending, and finally talk about public investment.
Public spending
As I outlined in an earlier post, the share of public spending in GDP needs to rise substantially to get back to an acceptable level of provision. Below are the headline numbers for total current spending (excluding gross investment) and taxes from the OBR’s databank. We see the share of public spending in GDP rise under the last Labour government and fall under the Conservatives. The pandemic (with a little earlier help from the Johnson government) provided a sharp increase, but the plans Reeves inherited suggest a resumed decline.
A critical point that I made in that earlier post, which is routinely ignored in most analyses, is that this GDP share needs to rise over time because, in the UK and most other countries, the share of health spending in GDP has historically been on an upward trend for well known reasons. In that post I estimated that, compared to levels today, current public spending needed to rise by 3% of GDP to return to 2010 levels of public service.
